xo services scores. stability all around as the national people's congress starts its meetings. president trump good trade war gets underway. u.s. allies unite in criticizing tariffs and manufacturers come to terms with what america first could mean for them. welcome to bloomberg daybreak on this monday, march 5. alix steel is done in houston. reachingel tariffs are texas. >> that shrew. it is spare week. the who's who in the oil and natural gas convergence here to talk about oil ministers. steel tariffs are front and center. what if all of a sudden there

are tariffs or trade war's on national -- natural gas and lng and key oils. these are issues for the community. david: would it be bad for producers who will have to pay up on steel? >> they will have to pay more at the end of the day. i will speak with the x ceo of should near. he was pivotal in sin the ship -- shift on lng. he has the polls on the global economy. let's take a quick check on the markets. it is the morning of when it comes to what is happening in italy. s&p futures a little softer down, off by seven points. the dollar weaker, but it feels pretty calm as markets and -- it is all,,st your unless you are in italian bonds.

david: these are the three stories we are focusing on today. voting in germany and italy. leaving things up in the air in italy. jinping's meeting in china on the national people's conference. and number three, the turmoil over trade. alix: a real party over there guys. i want to kick it off with what is happening in europe. the action is a selloff or the italian bond market. the euro-dollar really calm. is the market going to have to deal with consistent and political uncertainty in europe? >> even though italian bonds are selling off, they are not really moving all that much, which is very interesting, especially considering the dire predictions should there be an unexpected

verdict. we don't of the outcome of this italian election there are still most being counted. it will take weeks, if not more, before there is a government that is: last. there is a dispute over the financial aspects of italy that removes it from five-star. it keeps it from too much volatility. a lot of uncertainty remains. i wonder how much we will get with respect to more concern about breaking up the euro and possibly having a less powerful european union? david: we put up a chart that says, once angela merkel got coalition, it was up on the dollar. >> it seems awash. since 1992, it has taken over 50 days to form a government. italy, 865.n i think back to last year, what of the great untold stories to it took the netherlands over 200 days to form a government.

in the meantime, the economy cap doing well. stocks up. there wasn't that much of a concern than. i'm just wondering if this is a nothing burger for the market. in the case of italy, we have draghi. we have good global growth backdrop. is this the case of markets can ignore this because we have ignored it before and nothing better has happened? a moment of breathing a stability. but for now, the markets are looking through this as a wash. alix: you had euro area sentiment here there is a lot of talk now the potentially global littleis rolling over a bit, especially if you look at the manufacturing pmi's. it feels like it might be hard bull a euro bowl -- euro at this point. >> that's right.

it seems like it was always prone for a potential correction in euro-dollar. euroaybe the backdrop, needing external demand. maybe this is the catalyst for something that lends to some euro weakness, dollar strength and a bit of risk off across the globe. >> there is not much uncertainty in china. out their goals for 2018. it will grow 6.5%, same as last year. although elastic, they said maybe there are upside. they did nothing that this year. is this good for global growth? face -- it is its important to preface anything with chinese goals to have a caveat power -- caveat.

this does indicate a willingness on behalf of china to crack down on leverage and allow growth to come in at a slower pace than what they have been targeting in the past in order to curb leverage and be in a more financially feasible place for a longer term. that said, if growth does disappoint to the downside, you can imagine there will be a loosening of some of those restrictions pretty quickly. whole, a financially stable china should be good for global growth. david: look at how strong china is. if they get too strong, we are not sure that is so good for us. >> exactly. one story that hopefully does the eu thinking about what kind of stepping up its review of foreign investment from china and european companies. in a way, they are helping xi.

when you look at china's goals, we will cut taxes, cut the deficit and maintain growth pretty stable, we will deliver. if all of those will happen in concert, they will need to keep growing the exports and that will need to be a bigger part of the growth story for them to a all the liberals or else they will have to use the fiscal and monetary leverage at the disposal. david: one thing we don't want to lose track of is they will restructure how they administrate their economy. they will put new people in place in reform and restructure. lisa: it is interesting in xi jinping's move to concentrate power the top. if this fails, everybody wants all those things and it doesn't happen a lot of the time. so what happens if it doesn't work? he will be held responsible.

alix: and what happens if the trade wars don't work as well. the weekend was about reading the responses to president trump. we hear from president trump that they will have more on car imports. as dessau what point does the fed and markets take this more seriously? lisa: i think markets aren't sure what this means. you haven't seen the selloff in caterpillar or boeing, which is the most penalized by retaliation. been a way, there has seriousness about this. if you look back to the early 2000's, when president bush imposed some steel tariffs, the absolute effect on gdp was a drag. but it wasn't that significant.

people don't think so. it is unclear how to trade that. frankly, it all depends on what the reaction is from our allies as well as china. so far, china has had a muted response to our allies stand to lose out more. there is a lot of uncertainty, i think. said trump may backpedal from these early outbursts if, as i would expect, stock markets continue to weaken or if evocative's bags and shows are included on the list of products on retaliation. we have a president who is very sensitive to the swings of the start market. the stock market has some power as to what happens with these trade wars. theaybe it does have ability to influence it. maybe he goes on a different populist preface.

i don't think that will happen. when i think about the effect this could have on the markets, what is warren buffett's favorite valuation? market cap to gdp of u.s. companies. that is rendered obsolete. that is the big avenue concern. prices betent will raised, volumes dropped overseas -- to what extent are those variables affected? david: i want to go back to friday when the president tweeted that trade wars were good. this morning, he had a new tweet saying that this is directed at nafta. this is fascinating to me.

i didn't know we were at war with canada and mexico. farmers are not happy about doing away with nafta. lisa: president trump has been talking a hard line. but these tweets in the face of vast criticism raises some question over president trump has any allies in his close circle with his proclamations. what is behind it? perhaps the stock market selling off could influence it. is this just potentially a way to get more votes for the midterms? there are some he questions with these escalating tweets. david: peter navarro and wilbur ross. >> let's call a spade a spade. in terms of the u.s. having a large trade deficit with canada, that is not the case. they have a respected dairy industry.

do people in wisconsin probably not love that? absolutely. is doing away with nafta the best way to solve that? no. these threats alone have been enough to deter and limit investment in canada. to a certain extent, these things are working. david: and it's only monday. with us. for being coming up, we will look at how the potential for trade war is weighing on the markets. live from new york, this is bloomberg. ♪

♪ david: not that long ago, the top was about the fed raising

interest rates. but that has changed in the last month or so. welcome, david. let's talk about trade. how much will that really affect the markets over the longer term? >> it will not affect the markets that much unless there's many much more reductionist actions and retaliations around the world. we don't think that is likely the case. trade policy has always been in flux. the administration is using anye policy a little bit product category doesn't stop trade in general. trade will still grow. we believe trade is one of the most important drivers of productivity and prosperity. david: what would go to the essence of it? those are some of the issues

that are important. there are a lot of trade agreements that are old. the u.s. has amongst the most liberal import policies. the u.s. has a lot of intellectual property it was to protect. it is not surprising this administration and many executives are raising these issues. they want to look at these agreements a revisit them. the point is let's not get panicked at this stage. the nafta go she shows are going on. canada and mexico will be exempt from these steel tariffs. x: nonetheless, when you talk to individuals, he goes down the fundamentals.

earnings are good, therefore you want to buy equities. if we see tariffs escalate in -- itapacity, that will is a small cap positive story. it could change their earnings power and revenue power. that?es >> factor in not that we are ignoring it, but there is a long path before we get to the point where margins are under pressure and corporate profits are dropping. that is true not just for trade issues. it is true for an -- for employment costs. we still see strong earnings growth. . estimate 17% out of the s&p and 2018. -- i estimate 17% out of the s&p in 2018. trade, naftaon talks are coming to a close in mexico city. negotiators are struggling to reach an agreement after president trump announced

tariffs on steel and aluminum. mexico and canada have front of fire against the u.s.. administration officials offered veiled warnings on future action. president has made quite clear that, if it comes to a done deal or no deal, he is likely to opt for no deal. he doesn't need to take a terrible deal. that terrible deal is how we got here. joining us from mexico is michael mckee. not freezing in canada, where you were before. how does this play into the nafta negotiations over the weekend? michael: they are definitely casting a shadow over these talks. nobody knows exactly what the president means when he talks

about including every country. are there any exemptions? his advisor said of the weekend, which would lead the canadians of mexico's to retaliate, because they are the two biggest suppliers of steel imports into the united states. but we have good news this morning from the president's tweet about have to he went on to say this. tariffs of steel and aluminum will come off if a new fair nafta agreement is signed. but you can't sign one if the -- unless you negotiated. so it does suggest that he will not hold the club -- apply today. meetingsold three-way with the mexican and canadian counterparts. we will see what he has to say. negotiators here have got very frustrated by the president's tweets and the tariff actions because it makes her job so much harder. but if he keeps it going, they will keep trying. david: can you tell us where

this is all headed. we were going to have a deal by the end of march. it is clear that we will have that. we have a mexican election coming up in we have the authority in congress going away. will this continue negotiating through the end of the year, maybe beyond? michael: that would be the best case scenario, people tell me. ant you look at is unrealistic promise of when they could finish this. it is extraordinarily complex. it took years to negotiate the first time around. they are only a sixth of the way through the entire treaty. with the elections coming up, although mexico and the united states, it becomes a major issue. the talk is they may suspend these negotiations. one more round probably washington next month. then suspend negotiations until after the american midterms. but if the mexicans elect the man who is the front runner right now, who is anti-american,

fanl we say, and not a big of nafta, that could throw a wrench into everything as well. we are in uncharted territory right now. alix: thank you so much. the national people's congress of china began today. joining us is stephen engle. learned in the last 24 hours. stephen: we learned quite a lot. the national people's congress parliament, setting the annual gdp car get for china at about 6.5% i like last year, they have also taking out -- taken out wording that they would tolerate higher growth, which they saw in 2017, 6.9%, which was above miss forecasts. about 6.5% is with their begging now.

have a target for a reduced fiscal deficit to gdp of 2.6%. that is much lower. also, fairly stable money supply. that means less stimulus. they told less debt in the system and less risk. of twoinst the backdrop major other stories, that's the threats of a trade war coming from donald trump. that pass a pollen the outlook for trade in china. -- heso this last-minute came last week when the communist party was trying to get legislators in beijing to pass an amendment to the constitution that would allow president xi jinping to go beyond his two-term limit. that will cause a letter debate within the halls of the great hall of the people, the seat of the legislature, over the next two weeks. even though many people derive this as a rubberstamp body, this

will cause of concern among young cadres that are coming up in the system and they want a chance to go further. but they will have perhaps a new emperor on their hands in xi jinping. david: thank you so much for joining us. we welcome now deborah lair, vice chairman of the [indiscernible] i always get that wrong, deborah. she is also the former u.s. deputy in trade deficit for china. is this steel and aluminum tariff issue a big deal for china are not? >> obviously, the chinese are tracking carefully what that you -- the administration is doing on trade. they are waiting and seeing what the next step will be. zi, -- fornt president xi, he wants a

positive trade relationship with the united states. his finance from year to come to the national people's congress with a big delegation to try and negotiate or at least get the process started of negotiating what would happen between the u.s. and china on trade. david: what is the most important thing you are looking for? is it a foregone conclusion the removal of the term limit for xi jinping? >> there's obviously a lot of talk about what is happening with the rule with the term limit. symbolically, it is very important. but the reality is that's xi jinping strength's, -- that xi fromng's strength comes being the secretary of party.

the symbolism of the removal of term limits is obviously very important. but the actuality is not that much. deng xiaoping was clearly in charge until his death. he had very few titles. but coming out of the mpc, one of the most important things is to look at the people that the president was in place into various positions and how they restructure the bureaucracy. david: what does it tell us? it was speculated he would become vice premier with a lot of -- would that mean for policy? >>p i think it is a positive thinker and he is known as a reformer. he is rushing hard on further market access. as the president consolidates his leadership, perhaps it means he has the authority now to overcome some of the obstacles that they have been facing in the reform process.

if we look at what hu jintao was doing through his collect the leadership, we saw limited to know market access during his time in office. david: does china stand to conflict? the china is not hit that hard. >> china is not hit that hard. certainly, what the chinese have been doing is trying to diversify their relationship and their trade so they are not overly reliant on the united states. can they unify at least what it when the united states and the european union is not united against them. the qualityated to of growth as opposed to the quantity of growth? >> they're not looking at this rapid runaway growth and have had in the past.

what they are looking to do is focus on areas that will help the restructure the economy and build up the mess to consumption. one of the things they have been -- premierd hints at li said it in his work report -- they are working on a major market opening package. we are expecting that to come in when president xi speaks april. eighth they are looking to move forward, that is a significant step. david: you talked about that before this program. is there any reason why it would happen this time? it seems like it is always put off a bit. >> that's right. there has been a real focus on internal reform, but not what they call the opening up to the foreign firms.

part of their argument has been that xi jinping has been facing big obstacles and he has not have the right people in place. coming out of the mpc, they have to put their money where their mouth is. but they have been giving clear his of their planning to do this. the scope of it will depend. on the state of the relationship on trade with the united states. and quite honestly, how hard we push them to open up some of these sectors, particularly where the unit is rates is most competitive. how, if at all, does that movement to opening the markets fit with the quest to reform the state owned enterprises and the leverage that those companies have? >> it will be very challenging. enemies of the state owned enterprises will have to be more market-oriented and more competitive. that will be a real challenge as they try to overcome the state sector. i think this will be one of the things that, if he is made vice premier, that he will have to concentrate on.

david: we thank you joining us. out thatant to point emmanuel macron is making headlines related to tears. gosaid u.s. tariffs would against a wto trade rule. earlierwanted speaking -- basically macron saying that tariffs would go against the vti rules. you look at the markets and you don't see much of a distinction what comes to your-dollar. overall, the equity market is from in europe despite any kind of headlines coming out from the trade war. it does feel kind of calm. if we look at other asset classes, he can get a feel for what i am talking about. the euro-dollar is relatively stable. the question is do you have to

rethink your whole thesis despite the fact that you will have a coalition government in germany with the uncertainty in italy? how pro-european can european be?rnments exley a selloff in the market in the bond market is all about italy with the yields moving up about six basis points. otherwise, there's safe haven buying. crude goes nowhere. david: everyone agrees it is important. let's get a check of what is making headlines outside the business world. president trump stepped up his efforts for terrorists. tariffs. he says nafta has been a bad deal for the u.s.. north korea's kim jong-un has

held talks with heads of south korea's government. the south korea advisors are trying to persuade kim to start talks with the u.s. on his nuclear weapons program. american first time an aircraft carrier has made a port call in vietnam since the end of the war between the two countries. andrrived today, both u.s. vietnam are trying to end china's expansionism in the south sea. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. david: the big news of the weekend was angela merkel in germany and elections in italy. we are welcomed from rome, francine lacqua. and also with bloombergs patrick. what do we know today that we

did not know on friday, or is that -- there much that we don't know. francine: what we know is that havestablishment parties been in power for over two years and were voted down. that the coalition without was going to put together did not have numbers. yesterday would say first of all that the country is ready for an anti-establishment government. they do not know how they will form it. it was probably a vote that was swayed by immigration. that is what a lot of these two votes had in common. it is unclear whether there is a little bit of subtlety and the amp-establishment and immigration party. now it is numbercrunching. party.-immigration

now it is numbercrunching and they will sit down. to berlin's go over and talk to patrick donahue. what happened with the spd? patrick: they released the results of the membership votes yesterday and they voted with a 66% majority to form a new government with angela merkel, which was the last big step in a long process of coalition making. it shows they have some basis for support, even though most of the base is skeptical. they did not really want to go into government with angela merkel for the third time in 12 years, but they will do it. the alternative was a new election and possible clinical -- political chaos for german standards. david: thank you so much. that is patrick donahue of bloomberg reporting from berlin.

want to ask about europe. we have more stability and on the more hand lesson italy per what does that mean for investors as they look at europe? stability forthe european when you look at italy and the unified government, that is what they are hoping for. you will not get a reform agenda immediately. i think the situation in italy is still very slow going and you are not going to have a new changes. there is no threat to europe. with germany growing in a healthy way and in a position to are the eurozone, things looking good toward risk assets. we think the euro is a little ahead of itself. david: do tuber -- due to results and possibly an europe,nt to unify because the people who seemed to

intended to not like europe that much. >> i think it was a lot of a positive. i wouldn't say what happened was a big negative. certainly would like to see more of a trinity between germany, france, and italy. having germany and france, which will have newcomer, more positive developments coming out of that country. things are good there. david: thank you so much. that is david bianco. eye one are keeping an the impact of trade wars and how they could spread. we saw the impact on the auto industry as well as consumer goods as you could potentially pay more for aluminum and steel imports. the other issue becomes what happens to the oil community? president trump is still tweeting in terms of imports and steel.

we are joined now. he is the founder of shin near energy and a former ceo. always good to catch up with you. thank you for being here. >> thank you. i want to start with the tariffs. you is your view on what port costs? >> we really don't know how it is going to work out. we think the impact on our project which includes liquefaction facilities. we feel it will increase our costs. alix: where does the cost fall in? does it race -- raise your cost base for customers? >> for us, yes, and hopefully we

can pass it on to customers. alix: one of the interesting things that you're doing is the way you are marketing. why don't we start with that. how are you doing with your equity infrastructure and holdings and i want to see how it impacts the cost there is. ofrif: the natural gas basis is becoming a quantity business. if is it a commodity, you need to be a low cost provider. we are very cheap gas. and also all the associated basis. today in the united states, any gas that is consumed in the u.s. will cost of dollar and or less. the issue is to bring it to to thet is needed

northeast and chicago and the midwest and california. now we need to get it to the coastline and move it to the rest of the world. also in the case of mexico getting it to the border. we have to create a new type of infrastructure. reserves wheress they are we need to make sure we can prevent the increase costs of the wellhead and not along the chain and make sure they haven't added to the cost of finding the gasket we think with the new business model by inviting partners from around the world to participate with us they can have the low cost of gas and infrastructure and liquefaction and get gas in the united states.

of course, they have to make an investment for that. you have to get the billion and it will get you at cost. does that number increased -- increase in any way if you wind up paying more for the infrastructure? charif: the major price increase would be forward what it would be for the life. -- life of it. or 30ill cost you for 20 years p we could see an increase --.he numbers we could all see an increase of the numbers. charif: the cost of the gas and the ability compared to the rest of the world takes years. likered to anything canada, australia, or east africa or any way that you find .ajor yes reserves today

into even if you increase 350? charif: it won't raise that high. alix: ro khanna margins are looking at? we -- whatare margins are we looking at? charif: we have more gas than we will know what to do is in the united states. in the next five years it needs to find a use. the alternative is summit he has to flow it which is not acceptable. will have a real problem of excess gas that we don't what to do with. if you keep it here it is a problem. on a global basis, it became

apparent that there was tremendous price sensitivity. when we had low prices in 2015 and 2016 and early in 2017, demand increased dramatically. it had been flat for the previous five years. ,ith this increase in demand all of the so-called excess capacity that was on the mac it got absorbed quickly. china, it india, middle east, and even europe increased demand to radically when prices became affordable. alix: and not with the supplies all we heard was that we were can have a surplus and it became difficult to measure demand. there is a lot of guess, yet you are looking to expand. there have been analysts saying you would be interested in buying other assets pick can you comment on that. charif: i don't want to be specific. we have been indicating that we wanted to buy. that is the way to continue to

reduce costs. it is a project we would look at but not the only one. we reviewed it bunch of project. the most attractive things we are looking at today are to find a way to work with producers to take the gas they don't need, which is why we have announced that we will build a pipeline through the hub to get rid of the guests that they will not need so they don't have to sell it. alix: you would be buying assets? charif: i don't think so. we are concentrating haynesville for the primary target to acquire assets. there are plenty of assets there. it is very attractive. 150 miles frome our facility, so it makes more sense. let you go, the big conversation will be about u.s. producers and about what is happening with opec. meetings to buy fuel

in the future. can you give us an update? isolatei don't want to it. we started with a group of 120 potential partners. saudi aramco was one of them. we launched our marketing effort only a few weeks ago. we are in the early stages. we are encouraged so far. of five or six potential buyers from all different walks of life. there will be utilities, majors, traders. it is an attractive transaction. the success will be if we are the low-cost providers. if we are low-cost, we will be very successful. if we aren't low-cost, someone will have to show me what number to be. alix: and you will do it.

it has been good to catch up with you. thank you for coming up. souki, the person in the united states who saw the fact that we could be exporting natural gas instead of importing it. a key figure in the shell road lucian in the u.s.. david: i think there was a lot of skepticism at the time. he was right. skepticism would be a nice way to put it. david: coming up, volatility month. funds?help hedge we take a look at them next in the wall street eats. as you commute in, you can to into the radio. you can listen to tom keene and jonathan ferro. beomberg surveillance can heard in new york, boston, the bay area, washington, d.c., all across the network on serious doubts a radio paired live from new york, this is bloomberg radio. ♪ --

♪ is "bloomberg daybreak." coming up in the next hour, bank of america, merrill lynch, and vice chairman. -- keith banks, bank of america, vice chairman. we turn to wall street beat. up, volatile returns. hedge funds suffer big losses after volatility returns to markets. an insurer makes a $15 billion bet on a u.s. insurer. siemens overhaul is underway. the largest engineering pushes

forward with an ipo. david: joining us is brooks sutherland. let's start with the hedge fund. was not pretty. i have to say this is one month. it is not a long. of time -- period of time. these are all negative numbers. i thought the hedge funds might benefit. healingall we have been -- hearing is we need volatility . finally we got volatility, but it was not the right kind of volatility, which you have to laugh at a little bit. the problem was that we saw unexpected big swings in the market and people were not positioned to take advantage of that. it was hard to maneuver and do that. the more that we hear this laundry list of complaints and reason why hedge funds are performance on ghost warned buffett's point that is there a benefit to putting your money

with hedge fund managers and paying the high fees? he just had the results of his 10 year study that his hedge fund would work here view one. when you see a report, it doesn't do much for the hedge fund argument. david: at the same time, there are some hedge funds that gain in february. to your point, when you are paying a lot of fees and some of it up front, you are paying with you make money or don't. doing ok is not quite good enough. brooke: you are paying to outperform the broader market. the broader market is basically flat. you see hedge funds down over this. and it is not a great showing. it is just one month, but we will see how the your pans out. maybe we will see sustained volatility that hedge funds are looking at and that could maybe swing it back in our favor. >> the other thing we are watching is that the deal to buy

had stopped taking on news. i wonder why. this is an insured bet. xl.would buy it feels like a positive evolution, especially losses this year. brooke: this will help themsified axa and move away from life insurance savings which tend to be more tied to financial markets which given low interest rates hasn't been a great business for insurers. i think the problem is the price. axa is paying a high premium for xl that would likely push up by a bidding war. reported there were others in on the deal. axa indicated it was not going to do large mna. m and a. i think there were caught offguard. the high does make it harder for axa to sell shareholders on

this. they will have to execute on the synergies and a lot of it is revenue based. david: they have been talking about spinning off. it is an ipo but only part of the health-care business paid now they will go forward with that. what is the strategy for siemens? brooke: they have a strategy where they are forming a holding company with all of the smaller versions of siemens. it has been a strategy shareholders have liked. higher arguably get a valuation on the pieces when they are separated out from the whole. that an interesting model people look for ge. could they attempt something similar? they tried to do that with the energy business and baker hughes. it has been said that is something they could look at for other businesses down the road. health care is one that investors have flagged as a potential breakout from ge.

they will watch the valuations of the siemens ipo carefully to see what multiple it could get on its own. alix: i want to talk about multiple. before the volatility, it was 40 billion euros. it will be interesting to see. : they may make some of that up over time. -- brooke: they may make up some of that overtime. they are really banking on the new product line to juice revenue growth. investors are a little skeptical about that. if we see results, that should help the siemens valuation. david: thank you so much for being with a spear that is broke sutherland from bloomberg hurray coming up, politicians don't agree on a whole lot. we'll talk about one vote that they might agree about. check out tv . you can watch us online and interact with us directly. this is bloomberg. ♪

♪ this what i'm watching in new york. it is washington. what is going on with dodd-frank. thatatched and one thing was talked about was cutting regulations. this is a quote of what was said. election tailoring of regulations is one of our most fundamental principles pay we want regulation to be most intense, most stringent for the very large most complex institutions. it is going to be a vote this week to move forward. it looks like it may happen and they might get together on this or you can imagine that elizabeth warren is none too pleased. alix: i should point out it will be good for the markets. bloomberg intelligence had a great report that said any juice we will get from financials need to come from the regulatory side. you have the yield curve slowing

and other macro issues. if we can get regulatory release , there is more money and more lending and take on risk and that will impact earnings. david: some of the democratic senators are saying, there are really needere that this relief. they're not making loans and not getting together and doing consolidation. this will free them up. alix: that is the theory. you know who is going to get any help, wells fargo? david: coming up next, we will have keith banks with merrill lynch global wealth by's chairman. that will be here. this is bloomberg. ♪

♪ david: germany unites behind

angela merkel, but italy spenders with voters saying they want something new, even if they are not sure what it might be. new set of goals, 6.5% growth and stability around. president trumps trade war -- trump's trade war gets underway. allies unite against steel and aluminum tariffs. welcome to "bloomberg daybreak," on this day. im by myself in new york. my colleague, alix steel, is in houston. alix: i miss you. of the like the oscars oil community. you all the opec ministers. ceos making presentations. there will be questions. to be one is, how does opec deal with shale? supposedly there is a dinner

tonight with opec members and show producers for the second year they have been doing this. there are reports that opec will meet with hedge funds that invest in the oil companies tomorrow. that is the topic. that dinner. about i'm trying to picture what it would bp what do they say? does opec say, are you really going to produce that much? alix: it is a tricky line, right? technically and legally they cannot get together and say, yet you are right i don't want to produce much and we want to keep prices high. it will be a thread the needle type of dinner. we will scour the streets and find out where the dinner is being held. later on, i have a great desk. guest. -- the big questions are if shale is the growth driver of demand, total reacttell -- to that. we look forward to that.

quite -- we are looking at u.s. ts stronger today. the euro dollar is weaker as it takes in what happened over in europe. you have a german coalition. italy is still the big? . you are seeing safe haven buying into the treasury market and picking up steam by three points -- basis points. 61 is a good number to be talking to show producers here in houston. all know, it was a big political we can in europe with elections in rome yesterday. anti-woman -- german rolling -- and a german coalition. in italy, where are we this ?orning where we were yesterday

what do you know about the government? much but't know very we do know is there are two who are making complains -- making plans for the new government. that is up to the italian president to select who he thinks might be a book to put together a coalition that would command the majority in parliament. claims will take a long time before we will get any resolution to that. david: talk to us what the italian president is likely to do. we have ahead of the five-star party saying it was up to him and trust him he can do it.

is there a process that you could have the five-star get together? they don't agree but they don't like europe? can i get together and run the country? much i think you see so turbulence and volatility in europe and around the world. i wouldn't rule anything out. they have been political animals. they do have certain policies that overlap and are skeptical , andd the european union they also are determined to get into italy. they wantbeen clear to inform it coalition. they are making competing claims.

it is unclear which one he might choose. the indications that would have that the president will be reluctant to do so. the field could essentially be open. david: thank you so much for joining us from rome. that is down crawford who heads up our government coverage. we are joined by keith banks. he is bank of america vice chairman. joining us from london is karen only from head of equity strategy at ubs limited. the equity markets as an investor, how does it look different? karen: the mainstream parties were the losers and the results today. i think there was no risk in

equity market. i think today people are a little bit nervous it is 1% relative. my point is that we just have such little visibility on what will happen. if you take away the election italian profit growth is double what is going on in the rest of europe. 2018.uld be in they have velocity and earnings, but the stock markets need to get something settled on the put go front. david: if you're looking as an equity investor, is the importance of what happened in germany greater than italy? i don't need to be cavalier, but italy has had quite a few governments since the war. karen: you are right. it was great rehab the result from germany and angela merkel can go through and should get support for germany.

that is all good news. it is a big company and big exporter. italy is a lot smaller. we just want to put this political unrest behind us and sentiment.anti-euro investors just want get rid of it so we can move forward. -- growth has growth s growth at 2%. note thatorgan had a said they are still bullish on telling equities. keith, what do you think? keith: i agree with a lot of the points that were made. fundamentals were good throughout europe, and growth is accelerating. the earnings outlooks -- outlook looks better. the political gymnastics don't help. orthink that all to me -- ultimately what will drive the

day in europe will be strong fundamentals. this could affect pe multiples in italy. ultimately, we think it will be a good place. we like europe overall. we are particularly pleased with what happened in germany. angela merkel has been not only an important leader in germany, but important meeting in europe. getting the ability to move forward and is thinking up with uncing up withs france has all been very positive. alix: on italy, when you look at what we have seen in the yield versus triple be credit. biple be credit -- triple credit, do think that is warranted or will we have to see where adjustment now that we have potentially a new coalition at some point?

if you are domestically exposed, you might have an issue. it depends on the sector you are in. corporate credit all over the world is incredibly cheap. coming back and profits are stronger and the corporate credits can trade at a rich level. italy would be a bit exposed. domestics would be exposed in italy if we don't get some sort of solution. alix: if it is a messy coalition, we are used to that. knows what that means for europe. we hope that is not the case. hope they just ask for forges to the eu would ask regulatory changes or changes in immigration. if that is the message going

forward, this could all be good news. carol only an keith banks will both be staying with us. coming up, nafta discussions make much progress. we are looking at the implications of a possible trade war, next. this is bloomberg. ♪

♪ alix here is your bloomberg is this flash. axa has offered to buy out xl. insurers have been takeover targets after natural

disasters/year pushed prices higher. there is a new robot to broadcom's proposed takeover of qualcomm. the committee on foreign investment in the u.s. has ordered qualcomm to delay its investor meeting for 30 days. shareholders were set to vote tomorrow on six broadcom nominees. broadcom plans to move its headquarters from singapore to the u.s.. once that happens, the takeover would not be covered at a committee. amazon wants to create a checking account product aimed at younger customers. according to the wall street journal, the largest online retail is in talk with big banks including j.p. morgan chase. they said it does not involve amazon becoming a bank. that is your bloomberg business flash. the talks coming to a close before president trump's proposed tariffs.

he said to protect our country, we have to protect our aluminum and steel. joining us is michael mckee. america first was the fear when he got elected, then we forgot about it, and now we are back to . where does that leave nafta? michael: it leaves them hanging. talkingo, they are tough and mexico they are talking trade. trade deals take a long time. i think they are unrealistic saying it will be done by march. it took two years the last time. it could get done, but there are controversial issues, including autos and how much has to be produced. electoraln up against considerations with the mexican presidential vote july 1 and the u.s. midterms in november. if the president is it going, there is no reason to think they couldn't get a deal. but with the america first attitude, does he keep it going? alix: is there the impression

that the steel and aluminum hardballll really be a play in negotiations, or do they take it at face value? they take it at face value, which is the worst way to look at it because it suggests he is after a global trade and he has followed that up with tweets suggesting the same thing. canada and mexico are two of the top five importers of steel into the u.s.. if there are sanctions placed on them, the administration suggests that will happen and they will retaliate. if they retaliate, what does the united states do that? you can see how it spirals out of the nafta negotiations fall apart. around the world, we are waiting to see how far the president goes and what kind of reaction we get from those who are targeted. thank you so much for joining us from mexico city.

keith still joining us is banks and over in london is karen olney. he's come as you advise investors and they come to you, how important is this trade with nafta? remember thate to this is the first pitch of the first inning of what will be at least a nine inning game. we have a lot to learn about what is going on. is this really setting the tone for where this will go? look interesting, if you at the u.s. and step back and put the trade issue aside, the u.s. is going to see 3% gdp growth this year, nominal could be between 5% and 6%. we will seek 16% to 18% earnings growth, even though rates have moved higher. we'll rates are still low. there is a lot of very positive things going on that would normally be a good catalyst for

higher equity prices. the one issue now, and we have seen it with volatility that came back in february, this trade issue will create more it is the impact on pd multiples. that you would see strong earnings and greater confidence and pe multiple expansions. we have to keep a close eye on it. will we see the multiple expansion along with the earnings growth? david: caring, how does it look for you in london? how big an issue -- karen, how does it look for you in london? we don't have tax cuts here are we have to deal with that, but also the eurozone is as they almost double u.s. these sorts of things and

retaliation do impact europe. theope it doesn't unwind last 20 years of global productivity enhancement from sending a good to the lowest denominator. but on thisext area, but it seems a higher equity risk on the european market. look keith, if you take a at the three sectors that underperformed in the last five days on the s&p, it was materials, industrials, and energy. if you're going to make a value play, those are the areas you should be playing very do you need to rethink how you allocate based on potential trade wars? keith: if the trade war is flow bone -- full-blown, then the multinational companies that get earnings and revenue overseas clearly will be negatively impacted. those are also the companies

that going into this were poised to have some of the best growth. our recommendations before this trade war issue was to be very fully weighted in large capitalization, multinational companies. with the global growth into viewing on, this synchronized recovery expansion is whether leverage was. we will have to see where think sell out and if that changes the dynamic. perhaps you get a little more defensive. a longhe first inning of game and we have to more of the cts beforels and fa we did something differently. we have if your question pair why are we still afraid about a backlash and why is the eu not afraid of u.s. backlash of text that could be applied to bases like google, facebook, and amazon? karen?

still out onry is both of them. i don't want to comment on that because it gets very technical. keith banks with bank of america and karen olney of ubs are staying with us. it is potentially the largest tech deal. broadcom's deal to take over qualcomm has hit a hurdle. we will discuss the latest. this is bloomberg. ♪

♪ david: we might have thought qualcommd cam buying was about price. it turns out there was another issue that could stop the deal. to go through it, we welcome back brooke sutherland from gadfly. we talk about the need for treasury to review this. plan with a look for

security problems. : there were multiple points brooke: there were we mightpoints that see copycats. maybe they would have a problem with the takeover of the company, but i will wage a proxy site and get hold of the board and have effective control of the board without having to have a review. we'll rising the risk and the precedent if they look the other way, they were concerned enough that they were talking about looking at it before qualcomm. has been a fairly sensitive tech area, where there are national security concerns, maybe on aluminum and steel. it is not limited to the united states. where now looking at europe as they are concerned about chinese investment in europe. angela merkel even as she is putting together a coalition.

brooke: they want to be competitive in the race for .echnology and automation they don't want to feed whatever advantage they feel the company has to chinese acquirers. they are being sensitive about this. david: is it a matter of we want to protect our industry which is understandable, or is it that there has been a lot of hacking going on? ownershipd is foreign in some of the companies that might give a back door to get in. qualcomm does work for the u.s. government, and i think there was concern among members about another company having control of that. it is important to mention that broadcom is trying to redomiciling itself as a u.s. company. a broadcom has said all the

board numbers are american and we have some business in america and we're going to move there and we should not be subject for it. the move was blatant. they have to take a look at this to ward off copycats who might say maybe we could reincorporate in america and try to do a deal. the language that broadcom uses against qualcomm is it blatant act to entrench its incumbent board of directors. there are fighting words going on. brooke: that is not the first time that broad cam has released that. you have a constant back and forth tween the boards and if there ever is a deal, you get the final statement and nothing ever happened. it will be interesting to see what ultimately happens because of the request. will't know if broadcom stick with it and maybe take

back another time. we'll have to see. david: this is probably not the last time we will hear about ci fius. atoke: they also looked equifax.ms because of it worries about exposing american data to a foreign buyer. david: legitimate issues. thank you so much. that is look -- brooke sutherland from gadfly. coming up, chinese government's new goals. this is number. -- this is bloomberg. ♪ mom, dad, can we talk?

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that's a good one. seems a bit long, but okay... set a memorable wifi password with xfinity my account. one more way comcast is working to fit into your life, not the other way around. ♪ david: welcome back to "bloomberg daybreak." i'm david westin. elk still, is in

houston. steel, is in houston. and: you have energy guides oil ministers from opec are you have big thinkers. you have ryan zinke he coming the secretary of interior and the secretary of energy also. arebig question will be, opec ministers and u.s. shale producers meeting tonight for dinner? if anyone can find that out, it would be amazing. you talk about ryan zinke he and people like that, when president trump was elected you heard there was good to be a huge uptake because they were taking regulations off. did that happen? we did see regulations on margins. we feel that they won't get more regular's and that was how full to ceos. the tariff on aluminum and steel

was pivotal. ceos have been buying u.s. assets, just not shale assets. there's also interest in libya and libya production. we will write down these topics with total ceo. when you look at what is happening in the markets, it is a risk off with futures down slightly. it is about digesting what is happening in the italian election. you have european stocks of .6%. you have italian bond markets underperforming. you have buying across europe as well as in the u.s. the exception is italy. a selloff with yields moving up for basis points, well off the highs of the session p are euro-dollar flat. a broader dollar strength story -- session. the euro-dollar is flat. a broader dollar strength story.

it will be interesting to see how italy develops. time to get ans update with what is making headlines outside the business world. kailey: the leader of the euro party says the coalition is in position to roll the country. fall almost certain to short of an absolute majority. anger appeared to signal over economic decline, higher taxes, and rising immigration. president trump stepped up his campaign to oppose tariffs on imported steel and aluminum. he tweeted that canada and mexico will be subject unless after is signed. he says nafta has been a bad deal for the u.s.. north korea's kim jong-un talks with top -- top aides. it is the first one with south korea.

they are trying to persuade kim to start talks with u.s. on its nuclear weapons programs. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. on this. -- this is bloomberg. alix: lawmakers are expected to .nd at sweeping changes we are joined in beijing by stephen. learnedthrough what we in the last 24 hours. learned at the great hall of the people that they will set the same growth target for 2018 as they did in 2017, and that is about 6.5%. it is a little different from 2017 because they omitted the word about tolerating a higher growth rate. they want to take some of the

pressure out of the economy and some of the debt out of the economy. this will be a push in 2018. we can see that as reflected in the fiscal spending target. the deficit percentage of gdp 2.6%.en reduced down to it was 3% the last couple of years. most economists expected higher. economymulus for this as they take out the risk. however, they will spend a lot more on defense. the president really ramps up the modernization for the military. they will increase military spending by 8.1%, upwards of $175 billion. that is a lot, what not as much as the united states, which is just under $700 billion. against the backdrop are a couple of very interesting and very important issues. that is the potential for a trade war with the united states

as donald trump has been tweeting. also, the push by the upper echelon of the chinese government to ratify the chinese constitution to potentially allow resident xi jinping to two-term limitis as dictated by the constitution. david: that is our colleague stephen engle. thank you very much. this morning, we spoke with deborah lehr of the ends -- pulse institute about the changes that would allow the chinese president rule indefinitely. is very the term limits important, but the actuality is not that much. he was clearly in charge until his death and he had very few titles. the mostt, where important things is to look at the people the president put in place in various positions, and how they restructure the bureaucracy. david: still with us now are

keith banks of bank and america merrill lynch and karen only onleya month -- karen in london. , you have stability. does it make a better investment? keith: stability is good. the big question on china is can a transition their economy from an expert driven high capital intensive type of growth to a more consumer driven, service oriented economy? if they can do that, it is a more stable base of growth. offidate without a big flow or what we used to hear about as a hard landing? so far, so good. david: they have done pretty well. since then, what about the risk on attitude overall? watch.people continue to

they are showing good signs of progress. if they can come in at 6% or 6.5% growth, that is a good number. china is important for global growth. growth forportant emerging markets. a healthy, stable china is healthy, not only from a growth standpoint but also from investor psyche and what we are willing to pay for earnings here and globally. alix: karen, the global growth story is important here we arty know for german data that domestic has held up that exports were softer as global pmi rolls over. talk about the links between them and what it means for holding up europe? goods and have luxury that consumption side of the story is good. we worry because if you look at

the exposure to the u.s., we used to say we saw the bulk of our sales to your us -- to the the u.s.. closer to 25 percent of european sales go to china. germany has hurt a little about the currency. they are not worried about pmi development of pmi's are in the one percentile. you would expect them to roll over a bit. germany would start if you seeing industrial goods and precision engineering being hit. we export more to dm. if china impacts what is going , and manyging markets other countries, that hurt germany more. rightod news in the euro now is we are seeing them talking about increasing domestic.

lowse traveling at 30 year and the percentage of jail -- sales. survey of doing a about 500 ceos, a big jump up and places like france, increasing over 12 months. a bit of domestic growth will offset it. capex the increase on depends on positive future. where are we right now on the risk on and risk off? we have had quite extraordinarily -- quite an extraordinary run. karen: the u.s. is in a longer cycle per the total gdp growth we have had has been a lot lower than normal. they are traveling at a much lower level. it has been a long cycle. if you look at europe, gdp growth is strong at 2.5% this year and have think -- hoping

for 2% next year. we have only started the recovery in 2017. we had six years of no profit growth. management wouldn't spend on capex. capacity utilization goes up. you increase cap expert we hope we get the second leg of euros recovery that keeps gdp growth going. you won't shoot the lights out on pmi. we don't think we are near the end of the cycle because you are just getting the first signs you are going to get coming through and confidence coming back. coming through and confidence coming back. where in the early phases of profit and confidence recovery in the euro area. alix: at the same time, keith, j.p. morgan said cyclical looks

stretched and especially if you growth a not gang buster in china. what you do that sector? technology, we like for two reasons. one, we think there is still attractive valuation. you have growth and cyclical component in technology. growth because if everything list they will benefit. chunk ofyclical, a big capital spending goes toward technology. the story that karen described in europe is a similar story for the u.s. .e have not seen capex it is kicking in now. ceo confidence is at high levels. that will be a good driver. what is interesting is growth continues to outperform value significantly last year and so far now.

it is outperforming value. you hope it will have better performance. alix: at some point, value does well when yields go higher, yet growth does well when the dollar is lower. are we in an environment where both will wind up playing well this year in that capacity? keith: you can see that. if you see 3% growth in the u.s. and the global economy continues to accelerate, which we expect, that is good for reciprocals. also in the later cycles of economic expansion and market recovery, the more cyclical and value-oriented stocks tend to are performed. we have not seen that yet. david: keith banks and karen , thank you for being with us. coming up, we take a look at opec next.

bloomberg surveillance can be heard in new york, boston, the bay area, was deep, and all across the united states on sirius xm radio. live from you new york, this is bloomberg. ♪

♪ daybreak.""bloomberg i'm kailey leinz. coming up, the president and ceo

of hilton worldwide. the bloomberg business flash. iheart radio has one another grace. . -- grace period. they have another two days to round up support for reorganization. it would spin off assets and give senior lenders control in a reorganized company. threat toy now pose a restaurant chains. the world's largest retailer where start offering prepared meals at its stores. are available now in 250 stores. hope to expand to 2000 locations by the end of the year. apple is planning to move into the high-end of a headphone market. willaker of ipod earphones

take on air funds. it wants to launch the device early next year. there could be delays. that is your "bloomberg business flash." dominant. oil all of the talk in houston and in the latest report says the shale production will continue to put opec under pressure. you can see the dominance the u.s. shale and production is slightly outpacing saudi output. one million barrels of oil a day shy of taking over russia as the world's largest producer. joining us is julian lee and oil stratus just -- strategist. also how they are is joining us. javier is joining us. what is the chatter on the ground were here? >> they had a bad reaction from

opec. they are at the annual conference in houston. when opec started cutting production in 2016, they were thinking about cutting for six months. the national energy agency anything it was short of this. opec cannot do the production cuts until 2021. lower forever. that is a new slogan. julian, what could wind up helping opec and alleviate pressure for them to extend until 2021? they have tohings

hope for one of them is a continuation of oil demand things the of the agency shows is oil demand growth beginning to ease as we go through this. -- period. opec has to hope that doesn't happen. it has to hope for is that non-opec supply does not perform in the way the international energy agency says it will. the bulk of the organization is is from the united states. there are also positive contributions from canada, so, -- brazil, and also from the north sea as well. that one thing that may slow down somewhat the growth of shale production in tariff. is the import that is been talked about on steel and the steal still that is needed in the oil industry. it is a very particular type of product.

it is not the same steel you make refrigerators and other goods like that out of. commodity,y specific and it is not made in sufficient quantity in the united states to meet demand if imports are more expensive. any raised costs will be put through to producers. alix: if you take a look at what we learned, 800 rigs in the u.s. . that is the highest level since april 2015. we have a chart we can bring up. they look at base production and it is going to double. what is the pressure on producers here in houston to still be conservative and do shareholder returns versus using all of the money for production growth? javier: oner -- heavy thing was clear.

most companies plan with a budget between $50 a biro and 55 dollars a barrel. they will get a lot of maneuver room to upset some of the inflation. hiring and hiring signs and also an increase production significantly this year. cashprobably have enough to redistribute to the shareholders. backdrop to a potential opec minister meeting with shoo-in -- u.s. shale reducers. what is the conversation going to be like, legally, behind closed doors. ? be that a lawyer

is in the room and making sure that everything that is said is to get themation interested. it will be a very pleasant meeting. both sides will interchange views of the oil market. i think everyone agrees about the market when you think of supply and demand and inventory. twoill go a lot better than years ago. opec will tell the share producers that every producer is in the same boat, and if they continue to flip the market it will be bad news for everyone. i suppose some producers will i hear you and we have shareholders. we are not here to change the price of oil. alix: julian, we miss you in houston. thank you julian lee for joining us. coming up later today, i will be aboutng with total ceo

opportunities in the u.s.. he is not a big leader in share -- shale for his company. what other interest sec in the u.s.? check out tv . you can watch us online and charts. our check us out. this is bloomberg. ♪

♪ alix: here is what i am watching today. it is libyan oil production.

it is interesting for two reasons. weekend, 300 barrels a day were lost. spent $450 million to get more assets in libya. that was just last week. what is the risk? how much can total stomach? i will be talking to the ceo later on about this and why they bid on libya and not u.s. shale. david: libya is not wrote complex right now. coming up on bloomberg markets, .ells fargo this is bloomberg. ♪ retail.

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counting up. trade tensions continued to escalate. the president's advisors indicate tariffs are coming without exception. resilient in the face of more political gridlock and europe. the establishment party taking a beating. -- a brand-new story for the brand-new trading week. a little softer here, down half of 1%. the euro a tiny bit weaker, 1.23 on euro-dollar and the fed 10-year -- the investors are trying to figure out what trade tariffs would mean for the mke